By advancing iPhone production from China to the United States, manufacturing costs can increase by 90%, bank of America analysts warned on Wednesday (through Bloomberg,
According to bofa analysts led by Vamsi Mohan, it is technically possible to move the iPhone assembly to the US, although it will dramatically increase production expenses and create logistic complications.
Analysts wrote to customers in a note, “The cost of iPhone can increase purely 25% on high labor costs in the US.” He explained that even though Apple finds domestic workers for the final assembly, a “important part” of the iPhone components would still need to be built in China and imported into the US.
Analysts estimated that Apple faced mutual tariffs on those imported components, the total manufacturing cost could increase by 90% or more, analysts estimated.
The analysis follows President Trump’s statement earlier this week, which is called Apple’s manufacturing in China as “unstable”. According to the White House Press Secretary Karolin Levit, Trump “Absolutely” believes that Apple may manufacture iPhones in the United States. Recently, during a media briefing, Levit said that the President believes that “We have labor, we have a workforce, we have resources to do it.”
Trump’s aggressive trade policies on Wednesday excluded China, stopping mutual tariffs on several countries for 90 days, but increased increasing duties on Chinese imports by 125%. In response, China has imposed 84% of repayment levy on American goods. It is difficult to assess where the stand-off goes from here.
The uncertainty caused by the trade war has overtaken Apple’s stock, which has fallen 14% since Trump’s tariff declaration of April 2, which is approximately $ 479 billion in market capitalization. Despite the recent 10% rebound, Apple’s shares remain 23% from year to year.
To make us financially viable for Apple, Mohan suggests that the company will need tariff waves on the components and subclasses built outside the country. However, they are not confident that this is likely to happen.
Mohan said, “Until it is clear how permanent the new tariffs are, we do not expect that Apple will take steps to carry forward manufacturing in America,” Mohan said. Instead, he guesses that Apple “will continue to diversify its supply chain, and will also increase the production of iPhones in other countries like India.”
Apple has not officially commented on how this current tariff is planning to address the situation. Apple will need to pay 125% tariffs on all goods coming from China from China to the United States, but it can import equipment at a lower 10% rate from other countries like India, Taiwan and Vietnam.
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